Jeremy Siegel sees 2,000 as fair-market value for S&P 500

Wharton professor Jeremy Siegel spoke on a live webcast Friday about stock valuation, saying that when interest rates are lower than 8%, U.S. equities, as measured by the S&P 500, have averaged a price-to-earnings ratio of 19.

That P/E ratio implies a fair-market value for the S&P 500 of over 2,000 based on this year’s combined earnings. That’s 10% to 13% higher than the index’s current levels.

Siegel argues that view works even if long-term interest rates, as measured by the 10-year bond, rise, since they are abnormally low thanks to the Fed.

“We are still at extremely normal, average valuations and, in fact, low valuations, given the interest-rate environment and even the anticipated rise in interest rates,” Siegel said.

He said European shares are about 10% to 15% cheaper than those of comparable U.S. companies. And Shanghai’s valuations are “pretty attractive.”

In addition, Siegel said the technology sector, trading at a P/E of 13, is at “one of the cheapest [levels] it’s ever been relative to the rest of the market,” adding that tech stocks have historically traded at a premium. “We’re used to seeing it at 25.”

Siegel spoke at the CFA Institute Conference: Equity Research and Valuation 2013 in New York.

This copy is for your personal, non-commercial use only. Distribution and use of
this material are governed by our
Subscriber Agreement
and by copyright law. For non-personal use or to order multiple copies, please contact Dow Jones
Reprints at 1-800-843-0008 or visit